A New Theory on Why the iPad Mini Costs So Much

There have been a bunch of theories about why Apple decided to put a $329 price tag on the iPad Mini when well-reviewed competitive tablets from Amazon and Google are priced at $199.

The theories include:

Because Apple can charge this much—its fans are either so brainwashed or so locked-in to Apple's ecosystem that they'll pay anything

Because Apple wants to protect its extraordinarily high profit margin

Because Apple's "mini" is better than the Google and Amazon tablets

All of those theories probably factored into the decision.

And now there's a new report out of Asia that adds a fourth theory, one that also makes sense: Apple's iPad mini production, at least for the time-being, is supply-constrained.

According to Siu Han and Alex Wolfgram at DigiTimes, Apple can't get enough of the screens for the new iPad mini, and the ones it can get are expensive:

The US $329 price tag for Apple's iPad mini is largely due to low yield rates for the device's GF2 (DITO film) touch screen technology, according to industry sources.

The sources said the DITO film sensor is having mass production issues, which has been a big contributor to why the device is approximately 40-50% more expensive compared to other 7-inch tablets that have OGS or G/G structures.

The sources said that GF2 touch screen modules are only about roughly US$5 cheaper than G/G ones for the 9.7-inch iPad models.

So, in other words, rather than stimulate absolutely massive demand for the new tablet by pricing it competitively, Apple is actually trying to control demand (and protect its profit margin) by pricing it higher.

Apple did this with the original iPhone, you will recall—pricing it at a positively usurious price in the early going, and then rapidly cutting that price when its supply chain and carrier networks ramped up. And the strategy certainly paid off then.

The circumstances now are very different, though: Apple's competitors are already in market with high-quality much lower-priced tablets. So Apple does run the risk that it will alienate some potential customers, cannibalize sales of the bigger iPads, and lose some gound in the platform market-share war.